Transitioning Global Financial System to Blockchain Inevitable

Sergey Nazarov, the co-founder of Chainlink strongly believes the traditional financial world (TradFi) and the blockchain and Web3 world will inevitably merge, and Chainlink will play an integral role.

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He recently spent some time in financial hubs like Hong Kong, Singapore, Sydney, and London, engaging with key players such as central banks, exchanges, and major banks – and he says it became clear that they face universal challenges: transactions require data, connectivity, and compliance. Chainlink has been addressing these issues effectively, he said.

Chainlink’s Versatility Amid a Fragmented Infrastructure

Nazarov predicts infrastructure fragmentation due to individual banks and asset managers having their own chains, in turn hindering interoperability. Moreover, the absence of shared infrastructure and standardised protocols complicates seamless transactions. Integration issues persist between blockchain and traditional financial systems.

The things that I found is that the problems are universal in the fact that transactions need data, transactions need connectivity and transactions need to be compliant. It is actually these problems that Chainlink has been successfully solving for years. It’s just been in a slightly different category.

Sergey Nazarov

Nazarov points out that while Chainlink has so far focused on Web3 and DeFi contracts, its flexible system can cater to various data types and ecosystems.

Building a Shared Infrastructure

But for anyone betting on crypto or blockchain replacing TradFi, Nazarov has sobering news. He believes traditional players will not give up their systems and therefore TradFi and DeFi have to integrate and find some common rules and shared infrastructure.

This creates the need for standardised protocols, like Chainlink, to enable seamless data and value transmission across chains, akin to traditional financial protocols like Swift and FIX. This infrastructure aims to facilitate transactions by providing a universal standard for data transmission, injection, and interaction with payment methods across blockchains.

We’re generating an infrastructure that is a global standard for data transmission and value transmission between blockchains and basically creating a set standard under which transactions can happen.

Sergey Nazarov

Related: BOB Mainnet: Bridging Bitcoin and Ethereum for Mass Adoption

Assets, Payments, And Unified Infrastructure

Nazarov outlines the three key components of the financial landscape: assets, payments, and the need for a unified infrastructure. He brings up the importance of a unified golden record as a solution to asset data fragmentation and the necessity of compliant payment methods:

In the new unified golden record model, what you really have is a single onchain data container smart contract that is both the representation of the ownership and the place where you feed critical data about the asset.

Sergey Nazarov

I feel this is the year where there is an explosion in high quality assets both in the Web3 world and in the banking world.

Sergey Nazarov

Nazarov also discusses the role of Chainlink in enabling transactions and asset generation, stressing the need for a robust platform to manage multiple steps in transactions and enable mass adoption. He ponders how Chainlink can facilitate transactions, asset generation, and the movement of stablecoins in a compliant manner:

That basically boils down to making a platform a robust set of features and tools that can be used to create and manage multiple steps in that transaction.

Sergey Nazarov

Over 10.5 trillion in transaction value enabled so far is a really big achievement and one of the biggest amounts of transaction value enabled in the entire blockchain industry.

Sergey Nazarov

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